Tag Archives: zoning laws

Understanding building codes and zoning laws

Home for sale in Dana Point. Click photo for details.

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When buying (or selling) a home, it’s important to be cognizant of a property’s local zoning and code violations. If you’re thinking about adding onto a property, doing a remodel, maybe subdividing to generate some supplemental income, knowing where your property stands in terms of its code compliance as well as its zoning restrictions can yield lots of crucial information on your house hunt.

What Are Code Violations?

If your home falls short of a county or municipal building code, it has a code violation. Many homes have some form of code violation. This is because building codes change all the time, and a house that was code-compliant when you bought it may now lag behind current standards. These innocent violations are “grandfathered” in, which means they are not regarded as violations if the home was up to code when it was built.

How do you know when a property was built, when any upgrades were completed and whether it’s in violation of codes or zoning ordinances?

See what the OC Property Assessor shows. Call your City’s Building and Code Enforcement Department and ask them for any permits pulled on the property. Ask them about any non-conforming use.  Ask when and how a non-conforming use has to become conforming. Ask if the property is a “legal non-conforming use.” Further, your Realtor should have access to tools that shed a lot more light on the current status of your prospective home from a code and zoning perspective.

Most serious code violations happen because the homeowner adds more living space without the proper permission. Other examples include water heaters or electrical points installed without a permit, failure to use non-flame retardant roofing material and the absence of smoke detectors: the list is endless.

Why are Zoning Laws Important?

Is my home legal? Can I get a loan on my home? Can I rebuild my home if destroyed? These questions can be answered if you know whether your property is in compliance with local zoning codes or not. A property’s zoning status is classified as legal, legal nonconforming (“grandfathered”) or illegal.  Legal compliance means that a property conforms to current code and can be rebuilt if destroyed, and qualifies for a FNMA loan.  Legal non-conforming means that at one time the property complied with zoning code but does not currently comply, but the nonconforming use may continue; generally these homes can be rebuilt and qualify for a FNMA loan.   Illegal indicates that the property does not conform to the zoning code and must be restored or removed, and cannot be rebuilt if destroyed and do not qualify for a FNMA loan.

What about remodeling and illegal uses?  Adding an addition to a home without permits does not automatically make the property illegal; being non-permitted is not the same as being an illegal use in the zoning.  If the addition would normally be allowed by zoning, the issue of non-permitted areas can often be resolved by working with your building department and obtaining letter of compliance or a permit as long as the addition meets code.  However, if the building addition would not be allowed by zoning, the addition will most often need to be removed or significantly modified so that the addition complies with current zoning.

 

A property with a catch: Why zoning laws matter

Property: 607 Calle Canasta, San Clemente 92673
Status: Off market; listed in June 2016 for $1,298,000

This property COULD be a tremendous opportunity for the savvy investor, but it comes with a catch so I thought it would be good to take a look.

On its face, it seems like this 5-unit complex is priced competitively enough so that there’s a little meat on the bone for an investor to earn some income right out of the gate:

$1,298,000 with 20% down brings your mortgage payment to just around $5,000/mo. If pro forma rents hold up and you can in fact earn over $5,600/mo, you might think it’s worth looking into further.  However, also included in the notes of this listing:

“Since 5th unit is non-conforming, lenders will require loan to be commercial paper. Building is zoned a four-plex, however large front unit was converted to (2) un-permitted units.”

A non-conforming use issue can quickly turn a great deal into a nightmare for the uneducated investor. Most jurisdictions in the United States have some form of zoning regulations in place. Certain zones may only permit single-family dwellings and thus forbid apartments and commercial uses.

In the aforementioned example, a 4-unit complex was converted to a 5-unit complex without properly permitting, probably because the property is located in a zone that prohibits such use. Therefore, this property is “nonconforming” to modern day building and zoning codes. In some cases, a property can be designated as “legal” nonconforming if its configuration and use was legal at one time and pre-dated the zoning laws.

There are plenty of non-conforming properties out there and the practice of changing the configuration and use of a property is not uncommon, but it’s important to know the potential hazards of investing.  For example, if a neighbor files a complaint with the City about an illegally functioning 5-unit complex across the street, the City may force you to convert the property back to how it was originally permitted. You may have issues with insuring a nonconforming property.  You may run into liability issues with future tenants.

It’s also worth noting that the seller’s agent believes any buyer requiring financing will have to resort to “commercial paper,” which typically means harsher terms, higher interest rates and much shorter timeframes to pay back a loan.  All things to consider when considering a non-conforming property.

Questions to ask:

Is this “legal” non-conforming or “illegal” non-conforming?

How many utility meters are there?

How many units is the City building department monitoring for the property?

Have all 5 units been occupied continuously for the past year?

If you have questions about a property you’re interested in buying or selling, contact me.